Do Hospitals Make or Lose Money By Improving Patient Safety?

By Paul Gallese, PT, MBA

Believe it or not, the answer to the question this article’s headline poses has been debated for at least the past 20 years. Many research studies have been commissioned to find the answer and to build a business case for patient safety.

Hospitals must justify every dollar they spend according to evidence-based methods, even if the dollar promises to reduce patient harm.

A few years after the 1999 “To Err is Human” Institute of Medicine report that called attention to the nearly 100,000 Americans per year that were dying as a result of medical errors, Leape, Bates & Berwick (2002) acknowledged the legitimacy of considering costs when evaluating whether or not to implement patient safety improvements. “It would not be practical,” they wrote, to fund all improvements, suggesting that the frequency and severity of a patient safety risk should guide decision making.

Can the cost of patient safety exceed the cost of patient harm?

In a Dec. 2019 Health Affairs article, internationally recognized patient safety expert Michael Millenson reviews several of the cost/benefit patient safety studies conducted since “To Err is Human” was published while urging hospitals to change the calculus to give higher priority to patient safety.

Millenson’s review includes a 2005 Schmidek and Weeks literature review of financial returns on patient safety investments, a study published in 2019 titled “Does Patient Safety Pay?” that concluded that targeted investments in infection prevention could improve financial performance (Beauvais B, et al., 2019), and a series of studies that sought to determine whether or not hospitals suffered financially from reducing surgical complications (Krupka, et al., 2012; Eappen, et al., 2013; Scally, et al., 2015).

All of these studies attempt to apply a cost/benefit rationale to patient safety. But are hospitals thinking too much about return on investment and not enough about their mission of reducing harm?

More evidence on the cost of harm continues to be found

While hospitals continue to weigh how much money and effort should be devoted to patient safety, more evidence on the cost of harm continues to be found. A study of 21,007 inpatients in a large multistate health system published in the Journal of Patient Safety found that more than 25 percent of the patients experienced temporary or permanent of harm that contributed to higher costs, lower contribution margin, longer length of stay, and a higher probability of 30-day readmission. There was higher mortality among those experiencing permanent harm (Adler, et al., 2018).

The study estimated that harm reduction within the health system would result in $108 million in total cost savings, $48 million in variable cost savings, an $18 million increase of contribution margin, and savings of 60,000 inpatient care days.

“Therefore,” the study concludes, “reducing harm not only is the right thing to do for patients but also is financially and clinically prudent.” The study also proposes a novel and practical approach using diagnosis related groups (DRGs) for hospitals and health systems to evaluate the financial impact of harm.

Determining the true cost of harm is vital

The Vitalacy team is deeply interested in helping its clients to find new and better ways of determining the cost of harm. We want to help hospitals understand how preventing harm translates into reduced costs and better performance on value-based care measures.

Vitalacy’s Patient Safety Platform has the capabilities to measure staff performance on measures such as hand hygiene compliance and purposeful rounding. The platform also can determine workflow effectiveness and whether or not your nurses show the signs of nurse fatigue.

The data collected by the Vitalacy platform can be cross-referenced with your hospital’s adverse event data – your hospital’s incidents of healthcare-acquired infections; of healthcare-acquired conditions such as falls, pressure sores, and deep vein thrombosis; and of harm caused by medical errors. This cross referencing can help demonstrate the cost savings that can be achieved by better performance on patient safety protocols.

By cross-referencing these data, health care leaders can see meaningful patterns they haven’t seen before. These comparisons provoke questions and provide clues to changes that can be made to improve patient safety. The data shine a light into dark areas and illuminate a pathway to patient safety by helping to create the conditions needed to advance and sustain improvement.

The good news is, each day, hospitals become more committed to patient safety, with hospitals large and small across the nation achieving impressive results. Our goal is to help hospitals clearly demonstrate the financial benefits of patient safety investments in the new age of value-based care. We want to help prove that dollars wisely invested in patient safety reduces harm to patients – and contribute to healthy financial results.


Adler, L, et al. Impact of inpatient harms on hospital finances and patient clinical outcomes. Journal of Patient Safety, June 2018;14(2):67-73. doi: 10.1097/PTS.0000000000000171

Beauvais, B, et al. Does patient safety pay? Evaluating the association between surgical care improvement project performance and hospital profitability. Journal of Healthcare Management, May-June, 2019;64(3):142-154.

Eappen S, et al. Relationship between occurrence of surgical complications and hospital finances. Journal of the American Medical Association, 2013;309(15):155-1606. doi:10.1001/jama.2013.2773

Krupka DC, Sandberg WS & Weeks WB. The impact on hospitals of reducing surgical complications suggests many will need shared savings programs with payers. Health Affairs, Nov. 2012;31(11).

Leape LL, Bates DW & Berwick DM. What practices will most improve patient safety? Evidence-based medicine meets patient safety, Journal of the American Medical Association, July 24, 2002;288(4):501-507. doi:10.1001/jama.288.4.501

Millenson, ML. The lurking danger in the “business case” for patient safety. Health Affairs blog, Dec. 2, 2019.

Scally CP, et al. Impact of surgical quality improvement on payments in Medicare patients. Annals of Surgery, Aug. 2015;262(2):249-252.

Schmidek JM & Weeks WB. What do we know about financial returns on investments in patient safety? A literature review. The Joint Commission Journal on Quality and Patient Safety, Dec. 2005;31(12):690-699.


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